2025 Policy Outlook: Implications for the private capital ecosystem
2025 Policy Outlook: Implications for the private capital ecosystem
Author: The Carta Policy Team
Read time: 15 minutes
Published date: January 24, 2025
Here’s what to expect from Congress and the new administration in 2025 and how the policy agenda will impact the innovation ecosystem—private equity, venture capital, and the startups and small businesses they support.
Contents
I. Governing dynamics
Republicans have officially assumed unified control in Washington with an ambitious agenda and major policy shift from the previous administration, particularly as it pertains to private capital. Here’s what to expect from Congress and the new administration in 2025 and how the policy agenda will impact the innovation ecosystem—private equity, venture capital, and the startups and small businesses they support.
Congress
Republican control in the House and Senate will allow President Trump to more easily implement his agenda and advance his cabinet picks and other key hires. Regulators will also face less scrutiny from a sympathetic Congress.
Even with unified control, legislating will not be easy. Slim margins and intra-party dynamics will require bipartisan support to advance most policy initiatives. The exception: tax reform. Unified control unlocks the reconciliation process, which only requires a simple majority vote for tax and spending bills.
House dynamics: Republicans maintained control of the House with a slim majority of 220-215. Narrow margins mean every member is empowered and has negotiating power, making unifying a diverse conference challenging. These dynamics have caused Speaker Mike Johnson to partner with Democrats in the past to advance legislation.
Senate dynamics: Republicans have a 53-47 majority in the Senate and new leadership as Majority Leader John Thune succeeds longtime leader Sen. Mitch McConnell. Republicans do not have a filibuster-proof majority, so bipartisan support is necessary for any legislation to clear the chamber’s 60-vote threshold. However, the Senate only needs a simple majority to advance tax and spending bills under the reconciliation process as well as approve nominations.
Administration
Much of the administration’s policy agenda will be driven through executive orders and rulemaking initiatives. Silicon Valley will have an outsized role in shaping policy in the new administration. Tesla and SpaceX founder Elon Musk has become one of the president’s closest advisors. Musk will also head the Department of Government Efficiency (DOGE).
Judicial Branch
The Supreme Court has weakened agency authority, revoking the longstanding Chevron doctrine, which granted deference to agency interpretation of rules within their jurisdiction. Now questions of ambiguity will increasingly be resolved by courts.
II. Tax reform
Tax policy will be a key focus in Congress in 2025 as key elements of the Tax Cuts and Jobs Act (TCJA) are set to expire. If Congress does not act, over $4.5 trillion in tax increases would take effect in 2026, impacting over 60% of U.S. households.
Process and dynamics
Speaker Johnson has set a target date of April to pass tax reform as part of a more comprehensive bill that would also include energy and immigration priorities. This is an extremely ambitious timeline, and House and Senate leadership have yet to agree on strategy.
- Reconciliation strategy: Republicans plan to use reconciliation to advance tax reform as well as other priorities like border security and energy.
- Price tag and pay-fors: The Congressional Budget Office announced that extending the TCJA as-is would decrease revenue by more than $4 trillion.
Provisions to watch: Innovation economy
The looming tax debate will center on the TCJA, but negotiations will put the entire tax code on the table—including issues affecting startups, growth-stage companies, and investors in the innovation ecosystem.
Individual, corporate, and capital gains rates: The TCJA made substantial changes to how individuals are taxed—it lowered the top tax rates and capped popular itemized deductions. Unless Congress acts, these changes will revert to pre-TCJA levels.
Prediction We expect Congress will extend the TCJA’s current individual income tax rates; however, higher-income brackets ($1M+) could see a slight increase on income and/or capital gains tax rates. The corporate rate will likely remain at its current level. Carried interest: Carried interest is currently taxed at the long-term capital gains rate rather than as ordinary income.
Prediction Despite the pressure, carried interest likely remains intact. Qualified small business stock (QSBS): This incentive helps drive capital and talent to startups and growth-stage companies.
Prediction QSBS remains intact. R&D expensing: Section 174 incentivizes innovation by allowing businesses to recoup some of the costs of developing new products and services.
Prediction Gets fixed, but given the spending pressure it is unlikely to apply on a retroactive basis.
Innovator Alliance
Carta wants to advance tax policy that bolsters private capital and incentivizes investment in startups, small business, and growth-stage businesses. Carta and our coalition partners have launched the Innovator Alliance to help shape tax policy that drives more capital, talent, and investment to the innovation ecosystem.
III. Capital markets
The new government is likely to increase its focus on capital formation initiatives and expanding investment opportunities. Much of the work can be accomplished at the SEC, where we expect the agency to devote more attention to bolstering capital formation under new leadership.
Congressional efforts
In Congress, capital markets policy is primarily driven by the House Financial Services Committee (HFSC) and Senate Banking Committee (SBC). Chairmen Hill and Scott have designated capital formation as a key focus of their agendas.
Key private market policy initiatives
Expanding access to capital: Policymakers will focus on making it easier for companies and funds to raise capital outside of traditional funding networks.
Promoting access to investment and ownership opportunities: Today, most individuals are generally prohibited from participating in private markets because of the wealth-based accreditation standard.
| Prospects |
|---|
| A comprehensive capital formation package is more likely with Republican control in both the House and Senate, but any ultimate legislation will need bipartisan support to advance. |
SEC
The SEC will drive many of the private market reforms. Under the second Trump administration, we will see a sharp policy pivot both on rulemaking and enforcement. New SEC leadership has already rescinded controversial accounting guidance that prevented banks from custodying crypto assets.
IV. Crypto, AI, and tech policy
A major focus of the new administration and the Republican Congress will be the development of a regulatory framework for digital assets as well as artificial intelligence.
Crypto and digital assets
Developing a regulatory framework for digital assets and stablecoins is a key priority as multi-committee workstreams are already taking shape.
Artificial intelligence
The Trump administration will likely take on a more pro-business approach to AI, prioritizing innovation, economic dominance, and competition with global adversaries like China.